Macrostabilisation Policy in Mainland China’s Open Economy Available to Purchase

A general equilibrium model for mainland China′s open economy is formulated and used to examine the effect of stabilisation policy on the internal and external balances. An expansionary monetary or fiscal policy in particular through its effect on consumption and labour supply raises aggregate supply. However, the effect on the external balance is ambiguous. The issue of trade‐offs between internal and external balances does arise; if the effect on production is greater than that on consumption, the trade balance will not be ameliorated.